The increase in the threshold on investment from Australia has dangers not only for the relationship with Australia, says CTU Economist Bill Rosenberg.

In a deal to be signed between the New Zealand and Australian Prime Ministers any Australian business investment in New Zealand valued under $477 million – almost half a billion dollars – will no longer be subject to scrutiny.

Bill Rosenberg said: “It is not the Overseas Investment Office scrutiny that matters so much. That has never been more than a stamp on the hand as the investment is made. It is that sensible policies like the Labour Party’s proposed stronger rules for overseas investment in strategic assets, or the Greens’ policies for more stringent conditions on overseas investment, or policies in the CTU’s own Alternative Economic Strategy will be ruled out. Labour for example wants to impose a 25 percent limit on overseas ownership of strategic assets. Under this new investment agreement, that will only be possible for assets over the $477 million limit. Commitments in the WTO and other bilateral agreements already make those policies difficult.”

“But it gets worse. The US will undoubtedly want the same limit in the Transpacific Partnership Agreement currently under negotiation. They may want an even higher one like the limit of over NZ$1 billion they imposed on Australia in the Australia-US Free Trade Agreement.”

This is a sign that the Government is willing to free up much further foreign ownership of New Zealand’s largest and economically most important assets,” says Rosenberg. “This comes at a time when we are supposed to be trying to reduce our overseas liabilities.”

Many governments have used capital controls effectively to prevent or mitigate financial crises.

However, U.S. trade and investment agreements still include sweeping restrictions on this policy tool. IPS has teamed up with the Global Development and Environment Institute at Tufts University to coordinate an economist statement urging the Obama administration to change course and allow governments to use capital controls, as part of a broader menu of policy options to protect their people from financial volatility.